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BP shares dive as crisis persists BP shares dive as crisis persists
(about 2 hours later)
BP Last updated: 10 Jun 2010, 16:29 UK *Chart shows local time More data on this share priceBP Last updated: 10 Jun 2010, 16:29 UK *Chart shows local time More data on this share price
BP shares suffered another difficult day as attention turns to the possible impact of the Gulf of Mexico oil spill on the UK's image in the US. BP shares suffered another difficult day as it continued to struggle with the fallout from the oil spill in the Gulf of Mexico.
The oil giant's shares closed down 6% in London after earlier plunging 12%. The firm's shares closed down 6% in London having earlier plunged 12%.
The UK government has played down fears expressed by some senior figures of "anti-British rhetoric" in the US. And the row over the spill has moved to Westminster - with calls for the UK government to try to ease relations between BP and the White House.
Prime Minister David Cameron, who will discuss BP with President Obama this week, said he understood the US government's "frustration". Prime Minister David Cameron, will discuss BP with US President Barack Obama this weekend.
Mr Cameron also said that the UK stands ready to help BP with the clean-up operation. Mr Cameron said he understood Washington's "frustration", adding the UK stood ready to help BP with the clean-up - referring to 600 tons of chemical dispersant that have been made available.
A government spokesperson told the BBC that the Prime Minister was referring to 600 tons of chemical dispersant that have been made available by the Department of Energy and Climate Change. Economic value
Price falls Meanwhile Chancellor George Osborne, who has spoken to BP chief executive Tony Hayward, said: ""We are all concerned about the human and environmental impact."
BP's shares, which are jointly listed on the New York stock exchange, plunged nearly 16% in US trading hours after London closed on Wednesday, on fears that President Obama would impose huge penalties on the company. He added said that "constructive solutions" were needed, emphasising that people "remember the economic value BP brings to people in Britain and America".
As a result, BP's UK share price opened at 345 pence on Thursday in London, down nearly 12% on yesterday's London close, and its lowest level since 1997. The US is considering taking legal action to prevent BP paying dividends.
The price has since recovered some of the losses during London trading hours to end 6.6% lower at 365.5 pence. And concern has been expressed by MPs about the damage that such action could do to one of the UK's top companies.
In New York, BP's US shares opened up 9% versus the previous US close. However the UK government has played down fears expressed by some senior figures of "anti-British rhetoric" in the US.
However, the recent price moves mean the oil giant's share price has almost halved since the Deepwater Horizon oil spill began on 20 April. The US state department has said the oil spill will not affect the relationship between the US and Britian.
'Very heavy price''Very heavy price'
BP's shares recovered some of the losses during London trading hours to end 6.6% lower at 365.5 pence.
The recent price moves mean the oil giant's share price has almost halved since the Deepwater Horizon oil spill began on 20 April.
The company has come under increasingly sharp attack by some US politicians for its handling of the spill, described as the worst environmental disaster the US has faced.The company has come under increasingly sharp attack by some US politicians for its handling of the spill, described as the worst environmental disaster the US has faced.
Overnight, the US Justice Department said it was examining ways of forcing BP to suspend its dividend until BP's full liability for the oil spill is known with more precision.Overnight, the US Justice Department said it was examining ways of forcing BP to suspend its dividend until BP's full liability for the oil spill is known with more precision.
And the Justice Department is only doing what influential US politicians are demanding. Which is a serious concern to BP, in that it may be a British company by dint of history and legal domicile, but it is very American by virtue of its giant acquisitions of a decade or so ago.And the Justice Department is only doing what influential US politicians are demanding. Which is a serious concern to BP, in that it may be a British company by dint of history and legal domicile, but it is very American by virtue of its giant acquisitions of a decade or so ago.
My conversations with those at the top of BP indicate that they're increasingly minded to go for a voluntary moratorium on dividend payments, to bring some kind of fragile truce to hostilities with the US government.My conversations with those at the top of BP indicate that they're increasingly minded to go for a voluntary moratorium on dividend payments, to bring some kind of fragile truce to hostilities with the US government.
But President Obama should be aware that such a suspension of dividends would in effect deprive US savers of some $4bn of income per annum. Or to put it another way, in a world of global capitalism, Obama can't punish BP and expect all or even most of the pain to be felt in Britain.But President Obama should be aware that such a suspension of dividends would in effect deprive US savers of some $4bn of income per annum. Or to put it another way, in a world of global capitalism, Obama can't punish BP and expect all or even most of the pain to be felt in Britain.
Read Robert's blog in full Send us your commentsRead Robert's blog in full Send us your comments
London mayor Boris Johnson told the BBC that BP had paid a "very, very heavy price", and expressed concern that the oil spill was beginning to damage the entire image of the UK in the US. London Mayor Boris Johnson told the BBC that BP had paid a "very, very heavy price", and expressed concern that the oil spill was beginning to damage the entire image of the UK in the US.
"I do think there's something slightly worrying about the anti-British rhetoric that seems to be permeating from America," he told BBC Radio 4's Today programme."I do think there's something slightly worrying about the anti-British rhetoric that seems to be permeating from America," he told BBC Radio 4's Today programme.
However, British foreign secretary William Hague has downplayed the extent of anti-British feelings across the Atlantic. However, UK Foreign Secretary William Hague has downplayed the extent of anti-British feelings across the Atlantic.
"No-one has used an anti-British tone in anything that I've detected," he told the BBC."No-one has used an anti-British tone in anything that I've detected," he told the BBC.
Speaking during a visit to Afghanistan, UK Prime Minister David Cameron, confirmed he would discuss the oil spill with President Obama during their regular phone call. And Deputy Prime Minister Nick Clegg also played down the prospect of UK-US relations being damaged.
"I completely understand the US government's frustration," he said. "It is about dealing with the ecological problem and dealing with it as soon as possible," he said.
"BP needs to do everything it can to deal with the situation and the UK government stands ready to help." However the former British ambassador to the US, Sir Christopher Meyer, told the BBC that the BP issue had become "a bit of a crisis, politically".
The former British ambassador to the US, Sir Christopher Meyer, told the BBC that the BP issue had become "a bit of a crisis, politically". "The government must put down a marker with the US administration that the survival and long-term prosperity of BP is a vital British interest," he said.
"The government must put down a marker with the US administration that the survival and long term prosperity of BP is a vital British interest," he said.
He added that with nearly 40% of BP shares held in the US the company was "a pretty vital American interest too, fully integrated into US energy infrastructure".He added that with nearly 40% of BP shares held in the US the company was "a pretty vital American interest too, fully integrated into US energy infrastructure".
Dividend fearsDividend fears
US interior secretary Ken Salazar said that BP should compensate other oil companies that have had to lay off workers because of a moratorium on deep sea drilling announced by President Obama in response to the Gulf of Mexico spill. US Interior Secretary Ken Salazar said that BP should compensate other oil companies that have had to lay off workers because of a moratorium on deep sea drilling announced by President Obama in response to the Gulf of Mexico spill.
Meanwhile, associate attorney general Thomas Perelli told a congressional hearing on Wednesday that the Justice Department was planning to take action to force BP to withhold its next dividend payment. Meanwhile, Associate Attorney General Thomas Perelli told a congressional hearing on Wednesday that the Justice Department was planning to take action to force BP to withhold its next dividend payment.
The drop in BP's share price is already bad news for UK pension funds, which invest heavily in the firm.The drop in BP's share price is already bad news for UK pension funds, which invest heavily in the firm.
The oil company has said that it pays £1 in every £7 of dividends that pension funds receive from FTSE 100 companies.The oil company has said that it pays £1 in every £7 of dividends that pension funds receive from FTSE 100 companies.
Further congressional hearings into the Gulf of Mexico oil leak are planned on Thursday. However the National Association of Pension Funds (NAPF) has insisted that BP's woes "should not have an immediate or serious impact on those saving into a pension, or on those who have retired".
It added that pension funds have shifted out of UK shares and that the average fund was now spread across many companies and many types of global asset.
US perceptionsUS perceptions
The US President has said he is looking for "ass to kick" at BP, and that he would have sacked BP chief executive Tony Hayward over flippant comments about the scale of the spill. President Obama has said he is looking for "ass to kick" at BP, and that he would have sacked BP chief executive Tony Hayward over flippant comments about the scale of the spill.
John Hofmeister, former head of Shell in the US, told the Today programme he thought the situation was compounded by American perceptions that a foreign company had "insulted the American landscape".John Hofmeister, former head of Shell in the US, told the Today programme he thought the situation was compounded by American perceptions that a foreign company had "insulted the American landscape".
"I think in retrospect it was a mistake for Tony Hayward himself to have been so fully present in the United States... with the accent that he naturally has... this was an apparent foreign company.""I think in retrospect it was a mistake for Tony Hayward himself to have been so fully present in the United States... with the accent that he naturally has... this was an apparent foreign company."
BP is jointly listed on the New York Stock Exchange - and trading in its US shares closed nearly 16% down on Wednesday night. In its latest update on the spill, BP sought to reassure investors that it was on a strong financial footing with a stronger-than-forecast cash flow.
BP said it was not aware of any reason why its US shares had fallen so sharply
In response to the sharp fall in the US, BP said it was "not aware of any reason which justifies this share price movement".
In its latest update on the spill, the oil giant sought to reassure investors that it was on a strong financial footing with a stronger-than-forecast cash flow.
It also said that the total actual cost to date was some $1.43bn (£1bn). This compares with a total of £55bn that has been wiped off BP's value since the spill began.It also said that the total actual cost to date was some $1.43bn (£1bn). This compares with a total of £55bn that has been wiped off BP's value since the spill began.
Thursday's opening losses follow a 4.5% slide in BP shares in the UK on Wednesday over fears of a dividend cut. Its next dividend is due to be declared on 27 July.
Market nerves have also been reflected in the value of BP's bonds, which now trade at levels comparable with junk-rated companies.Market nerves have also been reflected in the value of BP's bonds, which now trade at levels comparable with junk-rated companies.
This is despite the company continuing to enjoy high "investment grade" ratings from all three major ratings agencies.This is despite the company continuing to enjoy high "investment grade" ratings from all three major ratings agencies.
Takeover target?
Speculation is growing that BP's depressed share price may make it a target for a possible takeover.
"I can understand exactly as to why somebody else would want to buy the BP assets because I think they are grossly undervalued at the moment," said Robert Talbut, of Royal London Asset Management, a BP shareholder.
In a recent research note, Standard Chartered suggested that PetroChina - a subsidiary of China's state-owned national oil company - should make a bid for BP in order to gain a global presence.
"As a shareholder, it's not something that I would welcome and it's certainly not at this sort of share price I would be willing to sell at," Mr Talbut said, in response.